Fairness and the fight for equal opportunities are fundamentals in Europe. We like competition when it is fair and based on the merits: the quality of your product, the prices and the services you give. That is why the Single Market of more than 500 million potential customers is so attractive - it is an open and level playing field and you have a fair chance of making it if you play by the rules. And for those who do not play by the rules we are even-handed and enforce EU competition law consistently. And "we" are both the European Commission and the national competition authorities.
An important part of our European competition law is state aid control. By enforcing EU state aid rules, the Commission plays a key role in enabling a level playing field. State aid control has been part of our common rulebook since the very beginning, when EU member countries signed the original Treaty of Rome back in 1957. And these rules apply to all companies that do business in the EU's Single Market, regardless of size, sector or nationality.
The goal is clear: national governments cannot distort competition in the EU Single Market by giving an unfair competitive advantage to a particular company that its rivals cannot enjoy. State aid rules protect fair competition based on merits and European taxpayers.
Following its in-depth investigation of two tax rulings issued by Ireland to Apple, the Commission concluded last month that these rulings gave Apple a selective advantage over other companies. It artificially reduced the tax bill of two Irish Apple companies. This is illegal State aid.
Apple now has to pay the unpaid tax since 2003, which amounts to up to €13 billion, plus interest. This does not penalise the company in question with a retroactive fine but simply restores equal treatment with other companies and so a level playing field for competition.
We have also concluded investigations concerning tax rulings in Luxembourg regarding Fiat, the Netherlands regarding Starbucks and a scheme in Belgium benefitting 35 mostly European companies. In those cases, too, we found that a select few were given a more favourable tax treatment than others.
Of course, Member States can design their own tax systems and set their corporate tax rates. State aid rules do not interfere with this right. What is at stake here is the equal treatment of companies. In this context, it does not matter whether the advantage takes the form of a subsidy or a reduced tax bill. Indeed, the Commission has taken a series of tax state aid decisions addressed to Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Spain, Sweden and the UK stretching back to 1998.
So, the Commission's decisions concerning tax rulings are only the most recent application of rules that have been in place for a long time.
The good news is that most tax rulings are used in a legitimate way. We have asked all our Member States for tax rulings when they issue tax rulings, and have already looked at more than a thousand different rulings in the last three years. Most of them are designed to give companies clarity about what tax laws mean, not to help them avoid tax. But where they give a company illegal tax benefits, EU state aid rules come into play.
Looking ahead, the ultimate goal is that all companies, big or small, pay tax where they generate their profits. EU state aid rules alone cannot achieve this. We need a change in corporate philosophies and the right legislation to address loopholes and ensure transparency.
Today, base erosion and profit shifting is estimated to cost up to US$ 240 billion a year, or up to 10% of the world's corporate income tax revenues. Global tax avoidance is a huge problem and a growing global concern. We need to close loopholes. A lot more coordination is needed to tackle these issues. The EU, the US and their international partners must work together, because fair taxation is dependent on international cooperation. That is the only way we can avoid mismatches between our national tax laws.
At last week's G20 in Hangzhou, China, the leaders repeated their commitment to join their efforts for fairer taxation. It's a commitment that has already produced important results. The G20 countries' endorsement of OECD recommendations to limit tax base erosion and profit shifting is a positive step.
This is also high on the agenda in the EU. The Commission is pursuing a clear strategy towards fair taxation and greater transparency, which has already produced real change for the better: For example, EU Member States have last year agreed to automatically exchange information on tax rulings and produce country-by-country reporting of tax-related financial information of multinationals. But we want to go even further: in order to shed light on tax rulings that were previously in the dark, we are pushing for public country-by-country reporting that would make this information also available to the public - citizens as well as the press.
This is the context for the recent state aid decisions taken by the European Commission -and our ongoing work. I hope our enforcement action will help keep the playing field level and competition fair. And I hope that we will all keep up the momentum for European and world leaders to follow up on the common objectives to tackle global tax avoidance and pursue in earnest the common objective of having companies pay tax where they make profits. Because fair taxation enables our societies to give you a fair chance and create equal opportunities so no one is left behind.